Dear Becky: A Letter About Retirement Planning

Congratulations on your recent decision to purchase a dragon tattoo! I must say that the artwork is fabulous. Since you obviously wanted to buy something that would last forever, I’m glad that you decided to do it right. Lord knows that I’ve blown through loads of cash in my day as well. Being a cheapskate is not the way to go when you make one of these purchases. Well done.

On the other hand, I’d like to talk to you today about making a financial decision that may also stick with you for the rest of your life. Bear with me here….it might sound boring. It is called retirement planning.

I know, I know. It just doesn’t come with the same excitement as getting inked does. Yet, whether or not you make this decision at a young age is something that is going to stick with you for the rest of your life…. just like your tattoo. Let me explain.

Retirement Planning: It’s Freakin’ Sweet

I’m sure it took you forevs to save up for that beautiful body ink. It takes work. It takes sacrifice. It takes a little financial planning. However, did you know that the younger you start saving for retirement, the better off you’ll be? For instance, you are 20 years old right now. If you saved just $20 every week and invested it until the time you were 65, you could have a buttload of cash to retire with. Over last 30 years, the stock market has had an average return of about 10%. The same is true over the last 100 years as well. At that rate, you would have almost $750,000 in your retirement account. Even at a more modest 8% average rate of return, you’d be looking at over $400,000. How is that for the power of small savings (and compound interest)?!?

I know it may not seem like a blast in a glass, but if you would have invested that $400 you spent on backstage passes to Fall Out Boy, you would have made about $29,500 by the time you were 65 – without ever adding another cent to the investment! So, was that crappy concert really worth $30,000?

Once you become a tat sporting cougar, you may consider putting your money into an annuity. Essentially, annuities are an insurance product that generate some interest and pay out a monthly stipend. They are a bit less volatile than investing in the market and usually require a lump sum to get started. That is why most people wait until they are reaching retirement age to check these out.

Sure, it really isn’t fair to expect you to invest all of your money. I understand that you need to live a little. By all means, spend some of your money on some kick-ass fun! Believe it or not, I was a kid once too.

Still, I wish I had taken my finances more seriously when I was your age. I just want you to know how much you could be costing your future self. It isn’t that I’m against spending. I’m not. However, I’d like to see you saving some, doing a little retirement planning, and still having fun. You can do it all.

So, I hope you don’t mind a little helpful advice from good ole Uncle Greg. I just want the best for you. You’ve got a bitchin’ tattoo and a ton of potential. Don’t waste it.

Comments

Is Becky up there joining the Yakuza? Which might actually be a good career move since people who get gigantic tattoos are usually not the brightest or most socially well adjusted. Although I don’t think that they offer a 401k.

I happen to have a heap of friends with equally large tattoos who are exceptionally bright and “well adjusted”. In fact one of them just completed his Masters degree in Information Technology. I’ll let him know he had a bright future fixing computers for the Hell’s Angels…

As for the post – nice work Greg, I also wish I would have taken my finances more seriously when I was younger Still, better late than never.

W has tattoos all over, and I would not say he is dumb at all. He’s on a great career track. Yes, he has to wear 2 long sleeves under his button up when he goes to work so that his tattoos don’t show underneath, but he still loves them. I’m actually one of the only people I know that doesn’t have a single tattoo and all my friends are geniuses .

Yeah…a bit too much generalization. One of my patients is a university professor of mathematics…holds 2 PhD’s and quite distinguished academically and he is covered head to toe in tattoos…only his face is left untouched. I also have tattoos that I love and don’t regret.

as per the post, agreed my biggest regret is not saving when I was younger. UGH.

That is not a fair statement. The former superintendent of two large school districts here has his arms covered in tattoos. Many of which are vulgar and gang related because he grew up very poor. He changed his path and bettered himself and because very successful (and made a lot of money and great financial decisions).

There are plenty of doctors and lawyers that are inked up and you would never know it because their know how to act professional and know when to cover them up. I also have tattoos and don’t make poor financial decisions, so I take a little offense to your over generalization. I am also aware that sarcasm doesn’t come through in text, but I don’t read your comment as sarcastic.

Greg- nice open letter I really enjoyed it and hopifully “Becky” will take your advice and start saving!

Numbers are so impressive when you add a few years to them, but until you gain momentum you won’t realize that. I know so many friends who may not get tats but waste a little here, a little there, then wonder why they are broke..

Haha, sweet tat! The reason behind this letter is why I think 401k auto-enrollment is so important. Most people left up to their own devices will stick to the status-quo, which would otherwise be 0 retirement savings, but lots of cool tats.

Compound interest is great! It’s important to focus on long-term because of the inevitable booms and busts caused by the Federal Reserve’s market manipulation…long-term, though, as long as our currency doesn’t crash it definitely will pay off to slowly save for retirement.

Retirement planning definitely needs to be done a lot more than it is today. People will be shocked when they get closer to retirement by how much they have to save compared to if they had just started 10-20 years earlier. I’m glad I started with my first job post college, but some of me wishes I put at least a little in when I was working in high school. It’s never too early!

Great post! I totally agree! While I’m not saving for retirement yet, I plan to start as soon as my debt is paid off (by the end of this year) and make healthy contributions to my retirement every year from then on.

No reason not to save for retirement at the same time. For one, bankruptcy laws protect retirement accounts and pensions and you can’t ever go back in time to put money into a Roth for a year that’s past (after April 15 of the next year)…

It’s funny to me how many people who claim broke do have tons of tattoos or a smart phone, or pimped out rims on their car. You’re right that retirement saving is not sexy at all, but much more worthwhile down the road.

ha ha…a nice little twist on the “why you should invest early” type blog! Although I didn’t get a tattoo, I’m sure I was a lot like Becky in that I didn’t know about all this stuff when I just started out on my career. I really wish someone would have hit me over the head with the info!

Great post Uncle Greg! Good thing I’d swallowed my sip of water by the time I got to “tat sporting cougar.” You’re absolutely right that we (speaking as a young millennial) need to start investing early. Unfortunately, I don’t think most of my peers heed the warning. Hell, most of them don’t even want to invest in their company’s 401(k) plan! Crazies.

I guess I’m a bit of a ‘tweener: growing up in the fifties (the date, not the latitude) I had uncles and their friends who proudly sported tattoos (nothing new under the sun, is there?). As they grew older, I watched as they had them removed, one by painful and expensive one. Maybe that’s why our generation goes around without spot (if not without wrinkle!)

Tats are not the issue: it’s the spending. New cars (my money pit), world travel, concert tickets, clothes, toys (men and boys…) and all those other things are what suck up the money that you wish was there when you need it.

I’ve often thought about what I would tell my teen-aged self about finances and more importantly, would I take the advice? Yes, Becky will likely regret her decisions later on but perhaps it’s an expensive lesson she’s got to learn for herself. Sometimes we learn best from our own mistakes. This is not to say you should let your loved ones drown in their financial mishaps. It’s kind to offer advice, but I think the person’s also going to want to make that change in their lives.

I love her tattoo! But I do agree that if she’s spending frivolously all the time and not saving/planning for retirement, that it can be problematic down the line… I didn’t start thinking about retirement planning until my late 20’s, and paying off debt/investing until my 30’s. I’ve had some great experiences, but also some “shoulda woulda coulda” with some needless spending that could have gone to retirement!

It’s funny how judgmental people are sometimes. Nice tat, hopefully it wasn’t financed!

Compounding interest from savings starting at an early age is staggering. If only that point could be reinforced to kids/young professionals more often. Is there anyone among us that doesn’t wish they started earlier?

I doubt it~ I think that a lot of people realize how beneficial it is to start early, but just don’t have the ability to do what they know is right. I knew about compound interest back in the day…but I enjoyed buying designer clothes too much to care!

hahahaha! I love this post. I like my tattoo’s as well BUT I much rather spend that money on doing something like starting the Appalachian Trail and having that memory. By the way, I AM starting the AT this weekend so booyah!

Great post, Greg! It’s so hard when you’re young and care-free to worry about retirement. It’s eons away and taking out even $20 from your paycheck means less beer. But man, if they only knew the opportunity and reward they are ignoring. I’d like to think Becky would get her super fancy tattoo and invest in her 401k.

Nice breakdown. It’s so simple, yet so hard to motivate my younger family member to start saving. Mostly it’s because they don’t care about an arbitrary amount of money 40 years from now. But breaking it down to $20 a week is something they can grasp. Thanks uncle Greg!

Compounding certainly gives everyone room for pause when you imagine the amount you could have had by now. At the same time, important to take stock in enjoying certain indulgences when young (Fall Out Boy aside).

I started investing in real estate at age 21 so I’d like to think I started early which has helped both of us get ahead. My wife started investing in her early 20’s and then into real estate as well. She says the only thing she wishes she did was use a budget, especially now that we see how much it has benefited us these past years.

Same here. We started investing in real estate in our late 20’s. While we have always been relatively frugal, I wish we would have gotten on a budget quicker too. We could own a lot more real estate by now.

Wow! Your guys’ generation must be much more entitled than mine was. We couldn’t have possibly saved for retirement in our 20’s – we were so broke we were happy just to get food on the table. There were no mommies and daddies taking care of us. You hit 18 and you were one your own – period! We were in our 30’s before we were ever even able to think about saving for retirement. Between undergrad and grad school – it never even occurred to us to save before we hit our 30’s ’cause we were just looking for a way to EAT.
But, it’s great to see your generation thinking (and doing) something about this. Good for you! And teach your babies well!!!!!

Thanks Jim! We’re trying to teach them.
I’m not sure about entitled. I’d like to think we’re more financially aware Unfortunately, we have to be. We no longer have the option of a pension, so we have to completely take care of our own retirement.

I have always been pretty frugal. I remember sophomore year, my friends bought the tickets for Britney Spears come back tour. Remember? It involved a circus and lots of lights. I decided not to go because even the cheapest ticket, almost $200, would be half of my allotted money for the month.

Great post Greg, had me totally cracked up. For some reason I get the impression investing is not in Becky’s thought process. I hope it is in the near future, cause she really could save some dough starting at a young age. Hope she reads this!

This write up comes at a time when the younger lot is finding it extremely difficult to keep up with their rising expenses, even resorting to debts at times.. I genuinely wish they that they are able to strike a balance between their spending and savings ..from now only!

[…] over at Club Thrifty had a great post about making spending decisions called Dear Becky: A Letter About Retirement Planning. Some people have mistaken this post for a rant about tattoos, but to me, Greg’s […]

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